House Prices to Rise Massively by 2018?

Friday, 18 October 2013

The new house price bubble doesn’t look like it’s going to pop any time soon, if forecasts can be believed. The Centre for Economics and Business Research (CEBR) has said that over the next five years property prices across the UK are set to jump 23.7% - and over 43% in London.

By 2018, the average house price in the UK will be £278,000 (a new record) while homes in London will fetch up to £566,000. Although this is great news for homeowners, it adds further fuel to recent concerns about people getting onto the property ladder. The average annual salary is currently sitting at just over £26,000 per year.

It looks like potential buyers may be looking at home insurance quotes sooner than they think, however. David Cameron has decided to help those who want to get onto the property ladder by introducing the second phase of the Help to Buy scheme three months early. This will allow people to buy a house valued up to £600,000 with 15% of the loan being subsidised by taxpayers.

Although the Institute of Directors has called the scheme ‘mad’ and ‘very dangerous’, and Vince Cable has questioned whether phase two really needs to be implemented, Cameron has argued that he doesn’t want to stand by and watch as people’s aspirations are shattered.

The CEBR report coincides with news from the Bank of England that mortgage approvals have reached a five-year high. Daniel Solomon of the CEBR says that, although the Help to Buy scheme has played a part in helping the market, the housing shortage has been the real driver.

He commented: "Even London's prodigious house price growth, expected to be 6.9 per cent this year, is being driven by the fundamental fact that people want to live in the capital with its employment and cultural opportunities."

With more foreign investors buying up properties in London, property agent Knight Frank has claimed that more domestic investors are looking at buying in other areas of the country. Whether this will cause further property shortages, or simply revive the housing market outside of the capital, remains to be seen.



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